Health Plan Features: Implications of Narrow Networks and the Trade-Off between Price and Choice

By Laura Summer, M.P.H.
AcademyHealth, Research Insights

Summary

The use of narrow provider networks in health insurance plans is a cost containment strategy that has gained popularity of late. Network design features differ among plans, but insurers generally seek to offer lower premiums by limiting the group of providers available to plan enrollees. As interest in the use of narrow networks has increased, so have concerns about their effect on consumers’ choices, costs, and access to care. With the growth of narrow network plans, it is important to understand the effectiveness of existing and emerging network design strategies and the potential for policies to ensure consumer access to high-quality care.

This brief summarizes key points from an expert panel AcademyHealth convened in December 2014 to examine existing research on network design and use, to discuss the impact of narrow networks and tiered networks on consumers, to review policies and practices for ensuring that networks are adequate, and to identify areas for additional research. Research on the impact of narrow networks is limited, but early studies suggest that several factors affect whether narrow network strategies will succeed. These factors include the way networks are constructed, the characteristics of the broader market in which narrow network plans operate, and whether consumers have the knowledge and tools to make informed choices about coverage. Additional research is needed to help policymakers better understand how to define and develop enforceable standards to measure the adequacy of narrow networks. Research can also help identify the quality considerations to be incorporated into the network design process, the development of network adequacy standards, and the type of guidance that can help consumers understand plan differences when making choices among products.

Understanding narrow and tiered network strategies

In all cases, though, insurers’ primary goal in designing networks was to offer competitive pricing. Generally, quality was not a criterion for exclusion or inclusion in a network.

Practical considerations

Discussants… questioned whether consumers have the knowledge and tools they need to make informed decisions about choosing narrow networks or choosing among tiers.

A particularly serious concern raised by participants is that consumers are not aware that they may be financially responsible when out-of-network providers participate in episodes of care.

Researchers noted that, in thinking about how to provide information to help consumers make choices, it is important to remember that consumers will only act on information that comes from a trusted source and that consumers generally do not view health plans as trusted sources for identifying better providers.

Impact of narrow and tiered networks

Another important research question is whether access to care will diminish for consumers who enroll in health insurance plans with narrow networks. At this point, information about access is very limited.

Greater use of primary care and reduced use of specialty care occurred. Savings were concentrated among consumers who could keep their primary care provider.

Network adequacy

They suggested that, unless risk adjustment accounts for differences in patient mix and health status is employed and working well, the constructions of narrow networks could be used to discriminate against patients with complex conditions and greater needs. They also noted that questions about the effectiveness of risk adjustment remain unanswered.

Panelists agreed that measurement standards relating to the quality of network providers are desirable, but they acknowledged that more work is needed to develop and test quality standards and to encourage plans to make consistent use of such measures.

They also recognized that, in some cases, the level of available investment or resources might not be adequate to satisfy network requirements. For example, state Medicaid programs have developed some of the most stringent criteria regarding network adequacy, but having the regulations on the books has not guaranteed that enrollees have access to adequate networks.

Panelists suggested that more proactive monitoring of network adequacy is needed. They observed that current measures of network adequacy are weak and depend heavily on health plans’ self-reported data.

Conclusion

The AcademyHealth panel focused on the design and operation of narrow and tiered network plans and what early experience suggests about how the networks can become more effective. Participants acknowledged the importance of striking a balance between flexibility for insurers in designing networks while ensuring consumer access to high-quality care. They discussed the need for greater oversight of and better standards to measure network adequacy. Experts agreed that the long-term implications of narrow networks remain to be seen. In identifying areas for research on narrow networks, they emphasized that research should account for market factors, both in the study design and in interpreting the results. Given that the narrow network strategy relies on consumer behavior, a recurring theme was the need to educate and assist consumers in making informed choices. Panel participants emphasized the importance of considering quality as well as cost in the design, implementation, and evaluation of narrow network plans.

http://www.academyhealth.org/files/FileDownloads/RIBrief0315.pdf

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Comment:

By Don McCanne, MD

This nine-page brief from AcademyHealth provides an excellent summary of the status of the policy science behind narrow provider networks in health insurance plans. Since health care reform is about the patient – at least it certainly should be – it is helpful to read this while continuing to ask yourself how this helps the patient. Patient advocates will discover the shocking truth.

The complex policies behind narrow provider networks were not designed for patients. They were designed for the private insurance companies. To remain viable in an open market, insurance premiums must remain affordable. Narrow provider networks are only one more tool to reduce the cost of health care in order to keep their premiums competitive. As this report indicates, insurers select their network providers based on the lowest prices that they can negotiate – not on quality.

What do patients get when the insurers are trading away the patients’ choices of their health care providers? Quality? No. The only advantage that the insurers can tout is that patients allegedly are paying less in premiums and cost sharing because of the lower rates that insurers were able to negotiate on their behalf. But think about that. The private insurers are an intrusion that are responsible for not only their own expensive administrative excesses but also for the profound and costly administrative burden that they place on the health care delivery system.

Since these administrative costs are far greater than the negotiated discounts they receive from the providers, the insurers are actually increasing costs for the patients. Further, if the private insurers were replaced by a single public program, pricing in health care would be a fair bargain for us collectively, negotiated by our own public stewards, and thus would be serving the best interests of patients.

Narrow networks are an insurance industry construct that have been designed to serve their own interests at a significant cost to patients in choice, quality and value. We need to replace the insurers and their despicable policies with our own single payer national health program – a system designed from the beginning to better serve patients.

Do “Consumer-Directed” Health Plans Bend the Cost Curve Over Time?

By Amelia M. Haviland, Matthew D. Eisenberg, Ateev Mehrotra, Peter J. Huckfeldt, and Neeraj Sood
National Bureau of Economic Research, March 2015, NBER Working Paper 21031

Abstract

“Consumer-Directed” Health Plans (CDHPs) combine high deductibles with personal medical accounts and are intended to reduce health care spending through greater patient cost sharing. Prior research shows that CDHPs reduce spending in the first year. However, there is little research on the impact of CDHPs over the longer term. We add to this literature by using data from 13 million individuals in 54 large US firms to estimate the effects of a firm offering CDHPs on health care spending up to three years post offer. We use a difference-in-differences analysis and to further strengthen identification, we balance observables within firm, over time by developing weights through a machine learning algorithm. We find that spending is reduced for those in firms offering CDHPs in all three years post. The reductions are driven by spending decreases in outpatient care and pharmaceuticals, with no evidence of increases in emergency department or inpatient care.

From the Introduction

At the firm level, we find that CDHP offer is associated with an approximately 5 percent reduction in total health care spending in each of the three years after CDHPs were introduced relative to cost growth observed for non-offering employers. The long term decreases in spending are focused in outpatient care and drugs and there is little impact on inpatient or emergency department spending. If these effects are due only to changes in health care spending among those enrolled in CDHPs, they imply local average treatment effects for those enrolled in CDHPs of an approximately 15 percent reduction in total spending in each the first three years. Differences in impacts by CDHP plan structure are not statistically significant. However, consistent with our hypotheses, the pattern of the point estimates suggests that the impact of CDHPs is greater when paired with HSAs (versus HRAs) and when employers make smaller account contributions.

From the Summary and Discussion

This study substantially adds to our knowledge on the long term cost impacts of CDHPs. We estimated spending trends for three years across over 13 million people across the country in an analysis estimating CDHP impacts without the threat of individual level selection bias. We find that health care cost growth among firms offering a CDHP is significantly lower in each of the first three years after offer. This result suggests that, at least at large employers, the impact of CDHPs persists and is not just a one-time reduction in spending. However, an important caveat is that the decrease in spending may be smaller in year 3 compared to year 1 post-offer. Recognizing that the differences are not statistically significant, these results are suggestive and consistent with a decreasing impact of CDHPs over time.

The decreases in total spending growth observed are primarily due to reductions in spending on outpatient care and pharmaceuticals. In contrast, by the third year there are no differences in either emergency department or inpatient spending.

The results presented here are limited to large employers and therefore may not extend to Medicaid beneficiaries, the individual or small group market, or to the health insurance exchanges where, on average, deductibles and out of pocket maximums are higher and/or enrollees have fewer financial resources. While the firms in this study were specifically selected to have lower income employees, all families had at least one adult working full time with benefits so they are typically better off than families not offered employer sponsored insurance.

In summary, in the first large multi-employer study to investigate long term CDHP spending impacts we find reductions in health care cost growth in all three years post CDHP offer and do not detect increases in any component of health care spending. These findings do not support either the concern that decreases in spending will be a one-time occurrence or that short-term decreases in spending with a CDHP will result in increases in spending in the long term due to complications of forgone care. We cannot rule out either of these concerns developing over an even longer time frame.

http://www.nber.org/papers/w21031

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Comment:

By Don McCanne, MD

This study will no doubt be used to claim that high deductible health plans with health savings accounts (CDHPs – consumer-directed health plans) are effective in reducing health care spending without causing any harm. However, the conclusions that can be drawn are far more limited.

The observed reductions of spending by those offered CDHPs by their employers were in outpatient care and drugs. The nature of these services may enable shopping for lower prices, but they also are services that frequently are used for medical problems of lower acuity which enables patients to make decisions as to whether or not they will forgo the medical services and/or prescriptions offered. These services may be for important interventions that could improve quality of life or even longevity, or they could be for interventions that would have no significant impact on health, or they could be for interventions in between these extremes that might have only a modest beneficial impact such as transient symptom relief. From other studies it is known that patients decline not only care that they perceive to be of little value, but when faced with deductibles, they often do decline care that is clearly beneficial.

Those who would claim that this study shows that no harm was done after enrolling in a CDHP point to the observation that being in a CDHP did not increase hospitalizations nor increase the use of emergency departments during the first three years of enrollment.

The reason this conclusion should be challenged is based on the fact that the population studied was the relatively healthy workforce and their healthy families in healthy years of their lives. It is highly unlikely that a very modest decline in outpatient visits and prescriptions would have directly resulted in crisis care requiring emergency department visits or hospitalizations during the first three years on the program, and thus these outcomes were an insensitive indicator of harm. The rate of these interventions in the relatively healthy control group was the same, as would be expected. Also, by limiting the outcomes studied to only these two, the study remained insensitive to other potentially beneficial results of obtaining health care, if nothing more than relief on receiving reassurance over concerns that patients may have had about their health.

This study has the same limitation of the oft-cited RAND Health Insurance Experiment which also studied a healthy population for a limited time in healthy years of their lives. These studies may have intrinsic validity for the populations studied, but they do not have extrinsic validity, particularly for an older, sicker population that also has been shown to forgo care when faced with deductibles.

This study asked if CDHPs bend the cost curve over time (title). The study showed that spending by employers was reduced 5 percent in each of the three years following the introduction of CDHPs. Since not all employees were enrolled in CDHPs, they theorized that the reduction in spending for those in CDHPs was about 15 percent. Even there, a 15 percent reduction in spending on a population that has minimal need for hospitalization and emergency department visits – where much of our total health care spending lies – certainly does not equate to anywhere near a 15 percent reduction in our total health care spending.

Remember that 80 percent of health care is used by the 20 percent of people with serious health problems. Almost all of that spending is well in excess of the deductibles and thus is not sensitive to consumer shopping.

Further, since employers insure the healthiest and least costly sector of our population, the 5 percent savings that they gained is only a drop in the bucket of our total national health expenditures. You won’t see much bend in this cost curve, especially if you alter policies so that patients do receive the beneficial services that they should have, but might otherwise forgo.

If we are going to bend the cost curve, let’s not do it through methods that reduce beneficial health care services. Let’s do it though ways that eliminate wasteful spending, such as the administrative excesses imposed on us by the private insurers and public payers operating in a fragmented, dysfunctional system. Let’s enact a single payer national health program instead.

Effect of Massachusetts healthcare reform on racial and ethnic disparities in admissions to hospital for ambulatory care sensitive conditions: retrospective analysis of hospital episode statistics

By Danny McCormick, Amresh D Hanchate, Karen E Lasser, Meredith G Manze, Mengyun Lin, Chieh Chu, Nancy R Kressin
The BMJ, April 1, 2015

Objectives

To examine the impact of Massachusetts healthcare reform on changes in rates of admission to hospital for ambulatory care sensitive conditions (ACSCs), which are potentially preventable with good access to outpatient medical care, and racial and ethnic disparities in such rates, using complete inpatient discharge data (hospital episode statistics) from Massachusetts and three control states.

Results

After adjustment for potential confounders, including age, race and ethnicity, sex, and county income, unemployment rate and physician supply, we found no evidence of a change in the admission rate for overall composite ACSC (1.2%, 95% confidence interval −1.6% to 4.1%) or for subgroup composites of acute and chronic ACSCs. Nor did we find a change in disparities in admission rates between black and white people (−1.9%, −8.5% to 5.1%) or white and Hispanic people (2.0%, −7.5% to 12.4%) for overall composite ACSC that existed in Massachusetts before reform. In analyses limited to Massachusetts only, we found no evidence of a change in admission rate for overall composite ACSC between counties with higher and lower rates of uninsurance at baseline (1.4%, −2.3% to 5.3%).

Conclusions

Massachusetts reform was not associated with significantly lower overall or racial and ethnic disparities in rates of admission to hospital for ACSCs. In the US, and Massachusetts in particular, additional efforts might be needed to improve access to outpatient care and reduce preventable admissions.

From the Introduction

The Massachusetts reform was designed to achieve “near universal” coverage, to improve access to care, and to decrease racial and ethnic disparities in both coverage and access that are well documented within the US healthcare system. In addition to extending coverage to the lowest income individuals — disproportionately comprising racial and ethnic minorities — the Massachusetts reform made reducing disparities an explicit goal.

From the Conclusion and policy implications

Why might Massachusetts health reform have failed to affect preventable admissions or narrow pre-existing racial and ethnic disparities in this outcome? First, although estimates vary somewhat, the absolute decline in the number of uninsured residents was about 6% of the non-elderly population; this still left 6% of the non-elderly population uninsured after full implementation of the reform. While gains were larger for racial and ethnic minorities, so too was the proportion of uninsured after reform. Second, before reform, Massachusetts had a robust healthcare safety net system that provided free care to many of the uninsured, who were disproportionately from minority backgrounds, through the state’s Uncompensated Care Pool program. Third, the public insurance (Medicaid) and publicly subsidized (Commonwealth Care) and unsubsidized (Commonwealth Choice) exchange based private insurance that residents received under the reform might not have provided optimal access to outpatient care because patients had to share costs or of because of low provider reimbursement. In 2009 the Massachusetts Medical Society found that only 60% of internist physicians in Massachusetts accepted Medicaid and 40% accepted Commonwealth Care, and anecdotal evidence suggests that finding a physician after reform became more difficult. Lastly, there could have been insufficient capacity of outpatient primary care providers to fully accommodate the influx of newly insured residents, irrespective of insurance type.

In addition to being a key measure of access, preventable admissions represent a clinical failure for patients and a needless expenditure of scarce healthcare resources. Our findings therefore have important policy implications. A large body of evidence suggests that insurance substantially improves access to care across many settings, medical conditions, and populations. In fact, recent US longitudinal studies provide strong evidence that acquiring public forms of insurance such as Medicaid and Medicare improves a broad array of health outcomes including mortality. The fact that we found no evidence that the Massachusetts reform diminished either preventable admissions or disparities in such admissions, suggests that particular features of the Massachusetts reform might need to be optimized to realize improvements in access to outpatient care that can prevent admissions. Although our results do not point to specific modifications, they might include continued expansion of insurance to the remaining uninsured, reduction in cost related barriers to outpatient care among those with insurance, and more comprehensive outreach efforts to the insured and uninsured to ensure adequate knowledge of the processes for applying for and effectively utilizing insurance, particularly among residents with limited proficiency in English language and low health literacy. Future studies will need to define which of these or other improvements will maximize outpatient access to care. While healthcare delivery systems vary substantially internationally, our results could provide insight into reforms of healthcare financing built on a mix of private and public funding and individual mandates that both wealthy and less wealthy countries could contemplate.

http://www.bmj.com/content/350/bmj.h1480

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Comment:

By Don McCanne, MD

Goals of Massachusetts health care reform included extending coverage to low-income individuals (disproportionately comprising racial and ethnic minorities) and to reduce disparities in care. How well these goals have been achieved is particularly important since it can predict how effective the Affordable Care Act (ACA) – the same model as the Massachusetts plan – will be in achieving these goals.

So how has Massachusetts done? This study looked specifically at the rates of admission to hospitals for conditions that are sensitive to ambulatory care. With better access to outpatient care hospitalization rates should be lower, with racial and ethnic disparities diminishing. These did not happen. The admission rates did not decrease and the disparities for both blacks and Hispanics were unimproved.

Although many factors contribute to the disparities, insurance should reduce financial barriers and thus improve access. Why didn’t that happen here? Some blame should lie with the model of reform selected. In spite of mandates for coverage, many people still remain uninsured. Also the cost sharing associated with health plans erect financial barriers to care. Further, both narrow networks of the plans and the lack of willing providers reduce access. These factors can be enough to explain why there was no improvement in spite of the full implementation of the Massachusetts reform. We can anticipate the same disappointing results nationally in the years following full implementation of ACA since it incorporates the same policy deficiencies.

As a remedy, the authors suggest more of the same. They would try to expand coverage to the remaining uninsured – a very difficult feat in a multi-payer system with varying qualifications for public assistance in financing the care. They would reduce cost related barriers for those with insurance, but not eliminate them. They would increase outreach efforts to assist patients in negotiating the administrative quagmire of the various insurance plans. They provide no suggestion for expanding the networks of eligible providers. In their call for “reforms of healthcare financing built on a mix of private and public funding and individual mandates,” they are explicitly endorsing the same model that has already failed to reduce these disparities.

In a press release, one of the coauthors stated, “But we are more likely to improve access to care and reduce preventable hospitalization rates if we focus on offering residents insurance plans that minimize cost barriers and are widely accepted by doctors.” The problem is that the ACA model of reform is driving the shift to ever greater cost barriers and much narrower networks of physicians.

Instead of an individual mandate, everyone should be covered automatically. Instead of erecting financial barriers to care, the health care system should be fully prepaid with first dollar coverage. Instead of perpetuating the administrative complexity of a multi-payer system of public and private insurers, one single simplified system should be put in place. Instead of separate restricted networks of providers, all professionals and institutions should be covered by one single program. Yes, the important model that they failed to mention is a single payer national health program such as an improved Medicare that covers everyone. That’s what we need.

Addendum (4/2/15): My comment that the “authors suggest more of the same” is not correct since they do recommend policies that would improve functioning of the financing system. My negative tone rests on the fact that when policy studies demonstrate the clear need for single payer reform, the current political environment within the academic policy and publishing communities results in the suppression of discussions of the single payer concept. That is a shame, especially when the need is so great.

English National Health Service’s Savings Plan May Have Helped Reduce The Use Of Three ‘Low-Value’ Procedures

By Sophie Coronini-Cronberg, Honor Bixby, Anthony A. Laverty, Robert M. Wachter and Christopher Millett
Health Affairs, March 2015

Abstract

The pressure to contain health expenditures is unprecedented. In England a flattening of the health budget but increasing demand led the National Health Service (NHS) to seek reductions in health expenditures of 17 percent over four years. The spending cuts were to be achieved through improvements in service quality and efficiency, including reducing the use of ineffective, overused, or inappropriate procedures. However, the NHS left it to the local commissioning (or funding) organizations, known as primary care trusts, to determine what steps to take to reduce spending. To assess whether the initiative had an impact, we examined six low-value procedures: spinal surgery for lower back pain, myringotomy to relieve eardrum pressure, inguinal hernia repair, cataract removal, primary hip replacement, and hysterectomy for heavy menstrual bleeding. We found significant reductions in three of the six procedures—cataract removal, hysterectomy, and myringotomy—in the program’s first year, compared to prior years’ trends. However, changes in the rates of all examined procedures varied widely across commissioning organizations. Our findings highlight some of the challenges of making major budget cuts in health care. Reducing ineffective spending remains a significant opportunity for the US health care system, and the English experience may hold valuable lessons.

From the introduction

The global financial crisis of 2008 has led to the tightening of health budgets, and spending is flattening or declining in real terms in many countries. Simultaneously, soaring demand for health care in the United States and the United Kingdom, exacerbated by aging populations with increasingly complex morbidities; the spiraling cost of health technologies; and growing patient expectations mean that the pressure to contain expenditures is unprecedented.

Health care inefficiencies cost the United States $750 billion annually. This has led to initiatives such as the grassroots, nongovernmental Choosing Wisely campaign, which seek to reduce the usage of overused or ineffective treatments. The return on investment could be substantial. However, disinvestment is difficult, since it is hard to define clinical interventions that are always inappropriate. And, like many other countries, the United States has underdeveloped systems and mechanisms to guide disinvestment strategies.

The NHS is a national single-payer system with one of the most developed centralized systems for assessing clinical and cost-effectiveness in the world. Thus, it should be well placed to achieve efficiency savings more rapidly and consistently than other health systems can. However, the 151 local commissioning organizations (funding organizations known as primary care trusts)—which until March 2013, as explained below, were responsible for purchasing health care for their resident populations—received little disinvestment guidance from the Department of Health or the National Institute for Health and Care Excellence (NICE). NICE primarily provides guidance on which treatments should be offered; it offers much less guidance on which procedures to remove or restrict funding for.

From the discussion

Our analysis shows that the first fiscal year of a major efficiency savings program in the English NHS was associated with significant rate reductions in three of the six low-value procedures assessed. This included a reduction in one relatively ineffective procedure (myringotomy, which declined by 11.4 percent) and reductions in two procedures that are effective only in certain circumstances (cataract removal, which declined by 4.8 percent, and hysterectomy for heavy menstrual bleeding, which declined by 10.7 percent). Comparable reductions in clinically effective benchmark procedures were not evident.

Despite the existence of well-developed mechanisms to guide purchasing decisions in England, there is still a lack of consensus on which procedures to target for disinvestment. Since its inception, NICE has produced abundant guidance to inform the adoption of new technologies in the NHS, but NICE’s contribution to disinvestment decisions is less well developed.

In an effort to address this issue, NICE has established a “do not do” database to support the more efficient use of health resources. However, the database has had a limited impact on purchasing activity because recommendations are limited in their scope, often focusing on the use of specific technologies; are not well publicized; and remain discretionary.

Perhaps reassuringly, our results do not show a clear association between changes in procedure rates and either neighborhoods’ socioeconomic status or commissioning organizations’ financial status. This suggests that there is no particular pattern of inequity. Unlike in the United States, where a person’s ability to pay (through health insurance or out of pocket) primarily dictates the level of access to health care, in England the relationship among finances, neighborhood deprivation, and access to health services is more complex. For example, poorer commissioning organizations in England often receive additional government funding to help address health inequalities.

As more data become available in both the United States and England, it will be interesting to compare the success of the different approaches being taken to reduce low-value care. In England the approach is top-down and specifies the magnitude of savings. In contrast, the United States has embraced new pricing models such as bundled payments and the nongovernmental Choosing Wisely campaign to reduce costs. A grassroots initiative, Choosing Wisely is particularly interesting since it puts a patient-doctor conversation about unnecessary tests and procedures at its heart.

From the conclusion

Our analysis suggests that in a single-payer health system with well-developed centralized mechanisms to assess clinical effectiveness, it is possible to quickly reduce the rate of some ineffective procedures. However, significant variations in reductions were found across local commissioning organizations. This both reinforces the view that disinvesting in low-value health services is a complex process involving several factors and highlights the ongoing challenge of creating affordable and effective health care systems worldwide.

http://content.healthaffairs.org/content/34/3/381.abstract

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Comment:

By Don McCanne, MD

Right now in the United States there is an intense campaign to control health care spending by changing payment systems to reward value over volume even though the knowledge of methods and effectiveness of doing this is quite primitive. This study from England’s National Health Service provides some limited insight on this approach.

Two of the factors in determining value are price and how beneficial the services are. Regarding price, single payer systems relying on a greater role of government are more effective in establishing appropriate pricing. In the United States, our fragmented system of financing health care not only fails to provide us optimal pricing, but, as this article reminds us, it dictates the level of access to health care based on ability to pay through insurance or out-of-pocket. In England, under the National Health Service, price is not a factor at the time patients access services, thus inequity based on price is essentially eliminated in their public system (though their private system does introduce an element of inequity).

On the other hand, whether or not services are of benefit can be much more difficult to determine. A Merit-based Incentive Payment System (MIPS) and Alternative Payment Models (APMs) are being initiated or expanded under the Medicare Access and CHIP Reauthorization Act of 2015 (H.R.2), and yet evidence to date indicates that they have had a variable and largely only negligible benefit in improving value. 

The Choosing Wisely campaign being advanced voluntarily by numerous professional organizations seems to be effective in selecting services that are not of adequate benefit. Although admirable, its effectiveness seems to be restrained by the paucity of procedures and services selected and by the lack of authoritative oversight of compliance.

In England, the National Institute for Health and Care Excellence (NICE) has provided much better guidance on which treatments should be offered, but it has not been as effective as it could be since its recommendations are only discretionary as to which procedures should have restricted funding or be disallowed altogether.

Although both England and the United States struggle with ensuring value in health care, the fact that the U.S. pays more than twice per capita than England is related to a greater role of government though their NHS. An example is found in the conclusion the authors offer in this report: “Our analysis suggests that in a single-payer health system with well-developed centralized mechanisms to assess clinical effectiveness, it is possible to quickly reduce the rate of some ineffective procedures.”

Instead of moving forward with our feeble efforts at improving value, we should immediately enact a single payer national health program. Then we will have a framework in which better value can be attained through improved pricing and through a system that would actually be effective in reducing or eliminating spending on some services that lack clinical effectiveness.

But we should not expect dramatic reductions in spending changes based on effectiveness since this study shows that the process is complex. In no small part that is due to the fact that there is considerable low-value care that is not no-value care and thus would be difficult to eliminate.

This is why it is even more imperative that we move to a single payer system. It would immediately give us the increased value we are seeking by eliminating hundreds of billions of dollars in administrative waste.

Pay for Performance Extends to Health Care in Experiment in New York

By Anemona Hartocollis
The New York Times, March 30, 2015

(A)ccountable care organizations are appearing around the country for Medicare recipients, with mixed results. New York, which has the country’s largest Medicaid budget, is committing more than $1 billion a year for five years to the experiment.

“If we succeed, patients will be more likely to get the right tests and medicine, doctors will benefit as we simplify the business side of their practices, and businesses will benefit as we hold down health-care cost growth,” Sylvia M. Burwell, secretary of the federal Department of Health and Human Services, said this month in New York City, during a visit to promote accountable care organizations.

In the future, if the experiment works, providers may be paid solely based on outcomes rather than volume of services, with better-performing groups earning more than those whose patients are in worse shape.

Perhaps the most unusual alliance is one that brought together more than 1,000 primarily Hispanic doctors serving Upper Manhattan and the South Bronx and Asian doctors working in the Chinatowns of Manhattan, Brooklyn and Queens; and North Shore-Long Island Jewish Health System, a hospital chain that serves a largely middle-class population. The nonprofit venture they formed, called Advocate Community Providers, counts more than 770,000 patients, by far the most of the 25 groups taking part in the program.

The force behind this group is Dr. Ramon Tallaj, a former health official in the Dominican Republic who moved to the United States in 1991.

But some of the Medicaid panel members questioned the logic of having such a large, diverse group of doctors and patients like Dr. Tallaj’s, without any obvious connections among them.

“What’s the glue that holds them together?” asked Stephen Berger, a panel member and investment banker.

The sheer size of the group could also make it complicated to track patients and determine who deserves credit for any improvements in their health. Patients may continue to see any doctor they wish, even if that doctor is not in the group.

Likewise, Dr. Tallaj acknowledged that if his patients did well, he could reap the benefits even if he had not seen them, though he said that was not his motivation.

Uwe Reinhardt, a health economist at Princeton, thought the idea was not as promising as some had hoped. “People thought there was maybe more waste than there actually really is,” he said.

Dr. Reinhardt was also dismissive of performance bonuses for doctors. “The idea that everyone’s professionalism and everyone’s good will has to be bought with tips is bizarre.”

http://www.nytimes.com/2015/03/31/nyregion/pay-for-performance-extends-to-health-care-in-experiment-in-new-york.html

Comment:

By Don McCanne, M.D.

Value rather than volume. Quality rather than quantity. Paying for performance. Reducing costs by eliminating wasteful services. Making providers accountable and rewarding them based on the value of their services. These concepts have become memes in the political and policy communities yet with very little in the health policy literature to confirm that these should be the driving principles behind health care financing reform, though there are quite a few studies that confirm that these concepts lead to mediocrity, at best.

It is urgent that we reconsider these concepts since in two weeks the Senate is expected to pass H.R. 2 which is designed to change payment methods from fee-for-service to models of payment that instill these ideas that are more rhetoric than science-based policy. Yet the rhetoric is leading to implementation of the Merit-based Incentive Payment System (MIPS) and Alternative Payment Models (APMs). These will have a major impact – more negative than positive – on the actual delivery of health care services.

Who is behind this meme-driven revolution in health care? Much of the academic policy community. Legislative and administrative staff members. Politicians. Representatives of vested interests that will benefit from these changes. Well-meaning consumer organizations. Although some are driven by greed, most are on meme-fed autopilot and have gathered in lemming fashion charging forward to a goal in which utopian perceptions will be dashed by the reality of plowing into the shoals of flawed policy.

Although it is quite disconcerting to read the meaningless rote responses of some of the more noted representatives of the policy community, we do have the comfort of of being able to hear from some of that community who bring us reality by questioning these conclusions that are based more on wishes than on objective evidence.

One of those on whom we can rely is Uwe Reinhardt. His brief comments in this article should give the Senate pause as they consider H.R. 2. Current political activity seems to be based on the concept that these flawed policies can eliminate much of the wasteful health care services provided. As he tells us, the problem with that rationale is that there is not nearly as much waste as has been thought. The initial results of experimentation have confirmed that there just is not that much recoverable by attempting to reduce or eliminate care that is not beneficial.

Perhaps Uwe Reinhardt’s most important lesson is in his comments about paying for performance: “The idea that everyone’s professionalism and everyone’s good will has to be bought with tips is bizarre.” What could be more fundamental than the ethical foundations driving the practitioners of the healing arts? The policy people have it all wrong, and they do not seem to understand why.